The standard consumer expert advice about buying extended warranties is don’t do it. The warranties are too expensive. A $100 extended warranty on a $500 device makes little sense. Instead, set up a warranty fund. Put the money that you would have used to buy extended warranties into a don’t-touch account. Use that money for unexpected repairs.
But who does that? I certainly haven’t.
I am also not a buyer of extended warranties. Except for this big one.
When we bought a new car in 2007, we debated the value of getting an extended warranty, and opted to get one, partly because our previous car had had hefty repair bills in its later years. Friends and colleagues tut-tutted. The consensus was we had wasted a big batch of money.
Now, with the seven-year extended warranty about to expire, here’s the accounting.
Four oil change and inspection services were included.
4 x $50 = $200
Four years of roadside assistance were included, beyond what was offered in the initial three-year standard warranty.
4 x $125 = $500
(There was one tow when an engine computer component failed, causing the car to completely lose power and refuse to start. That component was the subject of a bulletin to dealers when we had our trouble, which eventually turned into a recall, so we wouldn’t have had to pay for the repair even if we didn’t have the extended warranty.)
Two repairs in year six, covered by the extended warranty. (The dealership spotted the trouble, we asked if it was covered by the extended warranty, they said yes, they fixed it and didn’t charge us.)
$500
Total value of services: $1,200
Cost of seven-year warranty: $1,599 (Friends have bought almost-driveable cars for that kind of money.)
Value not realized: $399 (not accounting for lost interest and the vagaries of inflation, since I have no idea how to calculate that)
After this experience, I’m not sure that we will buy an extended warranty for our next car. But I don’t feel ripped off. The extended warranty offered reassurance and some financial certainty, though definitely at a cost.
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